SSkuMath

Dropshipping Profit Calculator

What do I keep per order once returns are accounted for?

Your numbers

Result

Profit per order after returns
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    How this is calculated

    Dropshipping margins look healthy until returns are included. This calculator subtracts supplier cost, shipping, payment fees and your ad spend, then applies your return rate to show the profit that actually survives.

    1. Payment processing = selling price × rate + fixed fee
    2. Profit before returns = price − (supplier + shipping + processing + apps + CPA)
    3. Cost of returns per order = return rate × (profit before returns + CPA + cost per return)
    4. Profit after returns = profit before returns − cost of returns
    5. Maximum viable CPA = price − non-ad costs − (return rate × cost per return)

    What to make of the number

    Returns hit twice: you lose the profit and you have already paid to acquire the customer. At a 10% return rate with a $14 CPA, returns consume about $2.60 per order on average — enough to erase the margin on most dropshipped products priced under $50.

    Frequently asked questions

    Why do returns hurt more in dropshipping than in other models?
    Because you usually cannot resell the returned item. The supplier is overseas, restocking is not economical, and the item is effectively written off — while the acquisition cost has already been spent.
    What is a realistic return rate?
    It varies enormously by category. Apparel and footwear run high, often well into double digits; simple non-fitted accessories run low. Use your own trailing data rather than a category average.
    What is break-even ROAS?
    The ROAS at which advertising cost exactly consumes your margin. Below it, each sale adds profit; above it, you are buying revenue at a loss. It is a cleaner control than a revenue-based ROAS target.
    Should I include the cost of the original shipping on a return?
    If you paid it and cannot recover it, yes. Most dropshipping operations cannot, so it belongs in the cost per return figure.
    How do I improve dropshipping profit?
    Raise price or AOV first, since supplier cost is largely fixed. Second, cut the return rate through better sizing information and product pages. Cutting ad spend last, because that is what stops the business growing.

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